Supply chain optimization is the practice of reducing inefficiencies in a supply chain. It includes practices employed to find, contact, evaluate, negotiate, and purchase goods and services from buyers. Supply chain optimization can be performed to make these processes efficient and waste-free. It includes redesigning, resizing, and recalibrating the systems of each sub-division. Some of the most recognized optimization approaches include lean manufacturing and the Just-In-Time (JIT) strategy.

A value creation project is a project that is intended to create value for the system as a whole. This can be done by reducing the existing supply chain costs while maintaining the same level of operability, or by creating new value through improving the resources used in the system. Supply chain managers are always trying to create more value from existing resources for the system to counter inflation or enhance productivity. For example, increasing the space in warehousing while negotiating lower rates for storage can facilitate the supply chain to be able to carry more stocks in a certain location, while doing so at a lower cost.

Why is supply chain optimization important?

The COVID-19 pandemic impacted supply chains globally, causing many companies to struggle. The restrictions on international transportation and the marketplaces that were shut down caused a lot of businesses to go bankrupt or have to lay off employees. Many businesses had to adapt their supply chains in order to survive the pandemic.

A company’s supply chain can be improved by optimizing its sourcing strategy, sales and operations planning. By keeping the stock of goods balanced, companies avoid having to stockpile goods in excess or running out of them. This allows them to sell their products at a higher price and avoid market shocks.

The use of block chain and artificial intelligence (AI) along with the Internet of Things (IoT) to manage data better, and to drive meaningful results from complex large datasets, is a key approach being used by businesses to improve their operations. The use of enterprise resource planning (ERP) software to have visibility, comply, manage, plan, and operate on data and goods better is another key approach being used by businesses. Robotics can be used to improve efficiency and produce agility in the movement of stocks in a warehousing facility.

Conclusion

Supply chain optimization is the process of improving systems and adopting best practices in order to reduce inefficiencies and costs in an existing supply chain. By doing so, supply chain optimization leads to lower wastage within a supply chain, which can ultimately lead to increased profitability for an organization. In addition, successful supply chain optimization can provide a competitive edge during difficult times. ..

The goal of supply chain optimization is to improve the efficiency and quality of the supply chain by reducing the cost of goods and improving communication between different parts of the organization. By reducing the cost of goods, supply chain optimization can improve overall business performance. Additionally, by improving communication, supply chain optimization can help to reduce risk and improve efficiency.

The traditional Plan, Do, Check, Act (PDCA) cycle is used to manage initiatives. The cycle starts with the planning phase, which includes identifying the benefits of the initiative and determining how much money it will save. The next step is the implementation phase, which includes making sure the initiative is effective and reducing costs. If it is found to be beneficial, it should be implemented. If it does not meet expectations or does not save money as expected, then corrective action should be taken.